Academy of Art University, one of the largest landowners in San Francisco, has had "consistent and repeated violations" of city land-use rules, yet the city has repeatedly refused to fine the for-profit school, even after it missed two compliance deadlines, according to a confidential letter by City Attorney Dennis Herrera.

The academy "is engaged in a game of obfuscation and delay," and the city's Planning Department has refused to issue notices of violation that could result in fines, despite those citations being ready to go, Herrera wrote in a confidential letter to planning Director John Rahaim obtained by The Chronicle.

Rahaim's inaction has left the city open to assertions that it is selectively enforcing its Planning Code, Herrera wrote.

"I find it inexplicable that despite the (academy's) repeated disregard of you, your department, and the laws you are charged to enforce, you would allow the (academy) to continue to violate the law without consequence," Herrera wrote in the letter dated Tuesday.

The city has maintained for years that the academy has purchased and then illegally converted buildings into classrooms or housing. The academy insists it never meant to break any rules and is negotiating in good faith. Rahaim on Thursday defended his position.

"Right now, we have one of the largest property owners in San Francisco at the negotiating table, and we are making progress," Rahaim said in an e-mail. "Nothing less than full compliance will be acceptable."

An academy official also said that "real progress has been made in the last several weeks."

"We hope to continue these conversations to finally resolve our disputes, once and for all," Rebecca Delgado Rottman, the academy's vice president for community and government relations, said via e-mail. The academy, in confidential settlement documents obtained by The Chronicle, says it has spent more than $2 million to come into compliance and applied for permits to convert its various buildings.

But after a deadline in May and another at the start of this month passed without the academy agreeing to a settlement, Herrera wants the Planning Department to issue violation notices that could lead to fines of $250 a day.

Seeking compliance

Officials for years have been trying to get the academy to comply with city land-use rules as it grew to more than 18,000 students and amassed more than 40 properties across the city, ranging from the Cannery building in Fisherman's Wharf to a warehouse near the Bayview neighborhood.

City concerns about its growth have been registered since 2005, primarily over the illegal conversion of office and commercial space to classrooms and the buying of apartment buildings, live-in studios, hotels and motels and converting them to student housing - all without getting city permits to do so.

After members of the Planning Commission in late 2009 accused the academy of thumbing its nose at the city, officials discussed the possibility of a lawsuit and vowed vigorous oversight. The academy promised to come into compliance.

Rahaim in February 2010 wrote a letter to the school's president, Elisa Stephens, saying his department would start enforcement actions on four properties the school bought and allegedly illegally converted to different uses after the city made it clear that land-use rules needed to be followed.

During that year, 40 academy properties received warnings for allegedly being out of compliance with planning rules, according to settlement documents.

"We did not intentionally violate any laws," Stephens, who owns the school with her family, said at the time. "We care about San Francisco - the city and the community - but there is lot of red tape. This is the city's reputation."

The settlement documents only mention one property - 460 Townsend St., converted for classes - that was given a notice of violation with a fine.

In March, settlement discussions began to bring all of the academy's properties into compliance with city law.

One of the city's conditions for any agreement, according to an April 2, 2012, confidential settlement document, was that the academy cease using 10 illegally converted properties.

At a luncheon in May at one of the properties, the Cannery at 2801 Leavenworth, Mayor Ed Lee proclaimed Academy of Art University "a beautiful institution" that has "done so much to fill so many vacancies in our city."

"By filling vacant properties, the academy has generated significant economic activity in some of the neighborhoods they reside in," Lee's spokeswoman, Christine Falvey said, adding that the mayor "sees no reason to leave the negotiating table when progress is being made."

A 'baffling' case

However, housing advocates contend that the art school's conversion of apartments to student use has depleted the housing supply while planning rules are ignored.

"I'm baffled. It's an open-and-shut case. Its clear the city should go after them," said Brad Paul, a former deputy mayor for housing under Mayor Art Agnos. "I've talked to some major developers in town who are in disbelief. How can they get away with this? That's the question on everybody's mind."

Former Board of Supervisors PresidentAaron Peskin, an outspoken Lee critic who has followed the academy's land-use issues for years, accused the mayor's administration of creating "a cesspool of pay-to-play politics" where the politically connected avoid penalties.

Peskin maintains that Lee has prevented enforcement actions against the academy, something Lee's camp says is untrue. Rahaim did not respond to a question about whether the mayor or any of his senior staff had directed him not to issue the violation notices.

Rottman, the academy's vice president, also did not respond to a question about whether the school's political connections have played a role in its dealing with the city. Stephens has donated regularly to the campaigns of local politicians, including Herrera, former Mayor Gavin Newsom, and Supervisors Malia Cohen and Jane Kim, although not to Lee, campaign finance records show.

The academy did hire political consultant and attorney Enrique Pearce to represent it in its land-use dealings with the city. Campaign finance records show Pearce's firm, Left Coast Communications, in October received $89,000 from the campaign committee for Proposition C, Lee's housing measure that voters approved, and another $23,000 for fundraising and campaign literature from a separate campaign committee that the mayor set up.

Pearce was the political consultant who ran the "Run, Ed, Run" campaign designed to persuade Lee to run for a full term as mayor rather than serve as a one-year caretaker. Pearce also operated a separate independent expenditure committee that backed Lee once he got in the race.

Falvey said any city decisions about the academy are being handling by the Planning Department and "are, and will continue to be, decided on the merits."